An increase in the capital stock causes labour productivity to
A) decrease and the standard of living to increase.
B) increase and the standard of living to increase.
C) decrease and the standard of living to decrease.
D) increase while the standard of living remains constant.

Question

Quizplus · Accepted Answer

An increase in the capital stock (such as machinery, equipment, etc.) would lead to an increase in labour productivity. This is because workers would have access to better tools and technology that can help them produce more output per unit of time. This increase in productivity would lead to an increase in output and income, which would ultimately translate to an increase in the standard of living. Therefore, the correct answer is B - an increase in the capital stock would lead to an increase in labour productivity and the standard of living.

An Increase in the Capital Stock Causes Labour Productivity to